Walmart Revitalizes Smaller Stores to Boost Growth on Main Street
Walmart (WMT) may be breathing new life into Neighborhood Market with assistance from its moribund Marketside concept and, ironically, Tesco (TESCO).
The rap on Neighborhood Market, Walmart's original small-store format, is that the return on investment is too small to get the retailer excited enough to run with it. Walmart hasn't made prospects for the store seem cheerier by its reluctance to discuss detailed plans for it. Yet, recently, the retailer posted a new Neighborhood Market video b-roll on its website for use by broadcasters. Although not widely touting the video, Walmart revealed the latest look for the stores, one that can be used for new locations and remodels.
The b-roll isn't the only hint that Walmart is making a new investment in Neighborhood Market. Recent press statements about Neighborhood Market remodeling reveal that the retailer has expanded service departments and particularly deli operations. The development is particularly interesting because the major emphasis for Neighborhood Market has traditionally been inexpensive grocery, produce and meat, positioning it as an extension of supercenter food operations.
Service departments aren't usually Walmart's favorite things. Too much labor cost. However, Marketside, which Walmart developed three years ago as Tesco began to develop its Fresh & Easy Neighborhood Market operation in the United States, has a convenience-food orientation that includes additional service items such as store-made pizza and other take-out foods. Many are ready to eat but even more reside in self-service cases adjacent to the service counters. Typically, those need only to be heated and dished out, which provides an attractive alternative for shoppers who like the idea of cooking for the family but don't have a lot of meal preparation time.
Neighborhood Market always had some convenience food but by focusing more on it, the stores become more than a supercenter extension. They emerge as an alternative that has a range of goods to satisfy shoppers who find supercenter grocery a bit inadequate even as they expand Walmart's reach into geographical niches that would be wrong for the big stores.
"The Neighborhood Market video is a new look that we are testing in this store," Walmart spokesperson Amy Colella-Lester noted "The expanded deli -- with more space, expanded selections and pizza oven â€" is also part of the test."
What's crucial to note about the new Neighborhood Market look is that it not only incorporates the brighter colors and starburst logos that Walmart has been adding to all its stores but signs and other highlights that looks very similar to what Tesco offers in its Fresh & Easy. Now, Walmart shouldn't be faulted for the similarity. It might even be praised. As respected a retailer as Jim Sinegal, CEO at Costco (COST) has declared that he and his management will steal any good idea they spy at another retailer.
Yet, Neighborhood Market also is a convenience oriented store that combines basic grocery operations with grab and go conveniences including a range of relatively low-priced prepared food for consumers to cook off at home.
Taken together, the moves at Neighborhood Market suggests that Walmart is taking a fresh look at the store as it becomes more serious about developing smaller outlets. The company hasn't expanded its test of Marketside beyond the handful of stores it operates in Phoenix, but it seems to have taken something from those operations and now is trying it out in Neighborhood Market. Additionally, it's worth considering that Walmart built its Latino-oriented Supermercado de Walmart store concept using a Neighborhood Market store as a basis. So, it appears that the retailer has a renewed interest in Neighborhood Market as a test vehicle and, if things work out right, perhaps a growth vehicle, too.
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